• The global pandemic has accelerated the already rapid growth in the volume of goods transported, putting tremendous pressure on the final leg of product delivery to the end user, or “the last mile.”
  • Autonomous delivery robots are one of many resources to alleviate this pressure, and are attractive from cost and environmental perspectives.
  • Our research highlights eight actions that Japan’s policymakers can take to promote the use of autonomous robots

Lockdowns, travel bans and remote work have dramatically reduced the movement of people during the pandemic. The flip side of these restrictions and lifestyle changes is a massive increase in the movement of goods.

E-commerce sales had already grown sixfold globally – from $550 billion in 2010 to $3.5 trillion in 2019 – before the virus forced much of the world to embrace online shopping. Yet in just the first three months of the pandemic, the UK. and US recorded surges in online sales volumes that exceeded the entire growth of the previous decade.

This skyrocketing demand, in turn, intensified pressure on delivery networks, especially in “the last mile” from distribution centre to consumer. In response, the World Economic Forum and McKinsey & Company have examined ways in which last-mile delivery can be improved to ensure greater efficiency and sustainability, using Japan as a model for simulated experiments and projections. Why Japan? The country is at the forefront of several trends affecting transport and logistics, including a labour shortage caused by population decline and the “hyperaging” of society. Many other developed countries will face similar challenges in the future, further exacerbating the pressure on last-mile deliveries.

The World Economic Forum’s ”The Future of the Last-Mile Ecosystem” report forecasts trends in global e-commerce indicators. We leveraged this forecasting model in Japan to glean city-specific insights, factoring in local conditions such as demographics and purchasing behaviours. The Forum’s report projects that e-commerce distribution volumes in central Tokyo’s 23 wards will rise by 85% by 2030, requiring a 70% increase in delivery vehicles, each of which will need to cover an additional 25% in distance travelled. In addition to putting a greater strain on logistics operations, the rise in e-commerce is also likely to drive a 20% increase in carbon dioxide emissions.

Many interventions can be deployed to cope with the increasing demand. Figure 1 presents a partial list of feasible initiatives from our Forum report. We considered a range of factors, including regulatory environment and intervention deployment status, along with the expected impact on CO2 emissions, delivery costs in urban and suburban areas, and other factors. These interventions were identified through discussions with experts to determine their applicability in Japan, although many could also apply globally.

We believe delivery robots, or “droids,” are a promising solution to explore. Our analysis of the technological maturity levels of potential interventions shows that increased use of droids could generate significant positive environmental and efficiency impacts. Delivery robots could help companies address labour shortages and low productivity, two challenges especially relevant in Japan.

The transportation sector’s productivity level is almost 25% below the average for all Japanese industries, and the sector faced a labour shortfall of 140,000 people in 2020 that is expected to grow to 280,000 by 2030. Further, Japan’s government is widely expected to permit the use of delivery robots on roads beginning in 2021.

Nevertheless, there are lingering policy challenges, such as vehicle standardization, the establishment of operating rules to avoid traffic congestion (the vehicles travel at low speeds), and infrastructure issues, such as the need for bigger curbside parking spaces for robot-carrying trucks to deploy the droids.

Other interventions, such as electric vehicles (EVs), hydrogen and fuel cell electric vehicles (H2FCEVs), and parcel lockers will likely continue to generate cost savings and reduce CO2 emissions. But while policy consensus on these technologies is already well advanced, discussions on governance systems for delivery robots, by contrast, are in an emerging phase and greater relative impact can be anticipated.

Image: McKinsey & Company

Implementing droids in last-mile delivery requires a reimagining of the entire last-mile ecosystem, and consensus-building among private and public sector stakeholders at regional and local levels will be imperative. Issues that need to be addressed do not necessarily pertain to the droids, themselves, but are foundational to creating an effective ecosystem enabling their widespread deployment. Our research revealed eight major enablers, as shown in Figure 2.

Image: McKinsey & Company

At the World Economic Forum’s Global Technology Governance Summit held in April 2021, the session entitled “Governing Goods on the Move” convened global experts who shed light on the importance of logistics amid the pandemic. Referring to our joint research, André Andonian, Senior Partner and Chairman of McKinsey, Japan, emphasized the importance of automated robots, focusing on environmental impacts and societal benefits.

He noted that autonomous delivery robots, as we state in our report, could reduce CO2 emissions from goods transport by 12% while easing Japan’s labour shortage problem. He also noted the importance of reskilling to implement these new technologies, adding that 30-40% of workers in developed countries will need to significantly upgrade their skillset and possibly switch occupations by 2030, as 50% of current work activities can be automated.

Yoshifumi Kato, Chief Technology Officer at DENSO Corp., a major Japanese auto parts manufacturer, underscored the importance of other technologies as well. He noted that quantum computing, for example, could be leveraged in logistics, especially in an era of large-scale delivery in which energy consumption and traffic congestion are increasingly challenging factors.

Historically labour intensive, the logistics industry has been slow to increase productivity in the past, as shown in Figure 3. As Japan and other countries increasingly experience population decline, now is the time to transform the industry through investment at sufficient levels to expand the potential of emerging technologies and improve productivity.

Clearly, as the productivity, environmental, and anti-congestion benefits show, the time has come to give autonomous delivery robots the regulatory and investment support they need.

Image: McKinsey & Company

Autonomous delivery robots could lead to a more efficient and sustainable last-mile network in Japan and many other countries. Key issues for stakeholders today include:

  • Revisiting regulations to accommodate new technologies (public sector);
  • Partnering to achieve consensus on standards (private sector);
  • Taking a vocal, active role in shaping both the regulatory environment and business/operating standards (civil society).

Reaching consensus on policy, operating standards, and management systems before autonomous delivery robot technology is mature and widespread should help to safeguard everyone’s well-being and increase the odds of successful implementation.

The transition to smart cities has begun in many parts of the world. Factoring logistics into such efforts and ensuring stakeholders closely examine the infrastructure and institutional design necessary to actualize a more efficient and productive future will contribute to a more convenient, sustainable society.

The authors would like to thank André Andonian, Senior Partner and Chairman of Japan; Bernd Heid, Senior Partner; Robert Mathis, Senior Partner; Hiroshi Odawara, Senior Partner, Tokyo, McKinsey & Company, and Yoshifumi Kato, Chief Technology Officer, DENSO Corporation.